Core Disinflation Evident Across Goods And Services

Italy's flash August HICP and CPI NIC both printed at 5.5% Y/Y, below the July prints of 6.3% Y/Y for HICP and 5.9% for CPI NIC. Overall, the reading came one the soft side of expectations, with the step-down in core inflation the key focus. Indeed Italy's figures helped keep the Eurozone aggregate M/M core reading from printing an unrounded 0.4% M/M (it came out at 0.34%).

• Core HICP (ex-energy, alcohol and tobacco) was 4.1% Y/Y (vs 4.7% prior) and flat on the month following a -2.0% M/M fall in July.
• Monthly HICP printed at 0.2% M/M (vs -1.6% prior) while CPI NIC was 0.4% (vs 0.0% prior). The larger fall in HICP compared to NIC was due to summer sales, which are only considered by the former measure.
• Food, alcohol and tobacco HICP prices rose 9.3% Y/Y (vs 9.8% in July). On a sequential M/M basis, unprocessed food saw a second consecutive deflationary print in August, with HICP inflation of -0.5% (vs -0.8% prior).
• Energy HICP inflation was 1.8% M/M (vs -1.4% prior), ending an 8 month streak of sequential monthly deflation (-0.1% Y/Y vs +0.6% Jul).
• Looking at core: non-energy industrial goods were -0.5% on the month, a step up from the -5.2% July print; Y/Y the deceleration was sharp though at 4.4% vs 5.2% in July. Clothing/footwear prices pulled back sharply, -3.1% M/M and to +2.8% Y/Y vs 5.4% in July, which may reflect the base effect of a shift in sales periods.
• Services disinflation was likewise key to the core disinflation, with Y/Y at 4.0% vs 4.6% in July. It was the 2nd consecutive 0.3% M/M outturn and well below rates 2x / 3x that magnitude earlier in the summer. Larger HICP services categories including restaurants/hotels and recreation decelerated Y/Y.

Source: Istat